Mr. Waterson: As the Under-Secretary rightly says, there are various points of principle that I do not want to labour now because we will come to them during the stand part debate. However, some matters in her reply still concern me. She is reluctant to give us any estimate either of the percentage of cases where a bankruptcy restrictions order might be thought appropriate, or of the proportion of bankrupts who would come out of bankruptcy in less than 12 months. I know that it is difficult to come up with an accurate percentage, but how on earth do the Government form a judgment on resources for official receivers' offices without at least a vague idea of those proportions?

Mr. Purchase: On a point of information, the excellent résumé of the Bill by the Library points to a parliamentary answer suggesting that the estimate of bankrupts who are culpable is between 7 and 12 per cent. That was based on the official receiver having prima facie evidence of criminal acts.

Mr. Waterson: That is very helpful, and I recall that estimate being bandied about. It is a mystery to me how it was arrived at. As I think the hon. Gentleman pointed out, it is based on criminality, but that is not what we are talking about.

The Under-Secretary has a fond notion, which I think is a massive problem with the clause, that there are two rather simple categories: culpable and non-culpable bankrupts. They are, first, the bad-luck bankrupts, who through no fault of their own, or even an inability to foresee what might happen as the hon. Gentleman suggested, find themselves facing insolvency, and, secondly, the bad guys—the rogues or the reckless. Those are difficult definitions; much of our debate will be sterile because we do not know how those definitions are to be given flesh in practice.

I made a point on Second Reading, to which we will come in more detail, that there are actually at least three categories. There are the rogues or the reckless, the bad-luck bankrupts, as the Under-Secretary calls them, and what I call the pathological optimists, who get up every morning fully intending to make the

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world a better place, and are not crooked in any sense, just wildly incompetent. They leave as much of a trail of devastation behind them as the Maxwells or the Lakers. Those distinctions are difficult to make. The Under-Secretary went to some length, showing a certain sensitivity, to deny the US provenance of the changes and suggested that somehow a convergence with the US was going on. We shall consider that in more detail.

I simply do not accept what the Under-Secretary says about the problems of defining business versus consumer bankrupts. There will be marginal cases, but it seems to me that someone cannot make up the fact that they have been in business simply as a way of getting into the other category. The only real justification, the whole case for the clause, is to encourage entrepreneurs, although I do it a disservice by summarising it quite that shortly. There is absolutely no place in the legislation for helping people with what are primarily consumer-debt bankruptcies.

The only difference between myself and the Under-Secretary is the problem of definition. If she does not like the way in which we, or the Consumer Credit Association, have defined things, let her Department bring the battery of intellect that it has at its disposal to work on the issue. It is not a question of principle that divides us; it is simply a matter or practical drafting. On that basis, I shall be happy to seek leave to withdraw the amendment.

The Under-Secretary claims business support for the proposals, but I am afraid that in debate on clause stand part and later clauses such support will become less obvious, as there are real concerns about the provisions and major alarm bells ringing throughout the credit and banking industries. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Mr. Waterson: As I said earlier, it will be convenient for the Committee to have a fairly substantial stand part debate on the clause, enabling us to return to the general points that the Under-Secretary touched on in her reply to the previous group of amendments, and to foresee and deal with some of the major philosophical issues that crop up throughout this final substantial part of the Bill.

We have to take as our starting point the Government's avowed intention. The avowed intention of the provisions is to encourage risk taking, entrepreneurship and enterprise in the British economy. It is right to say that some people might fail any number of times, for perfectly genuine reasons, although let us be clear that they will leave creditors. The one thing that all the bankrupts will have in common is that they will leave people behind who will be owed money. They will often be large organisations, such as banks, but if they lose money on one loan, they might be unable to offer a loan to someone else further down the road. I shall discuss some of the evidence from such organisations later.

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Small businesses can also be involved, as the hon. Member for Orkney and Shetland pointed out. If a small business goes bust in his constituency, the main losers, apart from individuals, will be other small businesses. There will be a knock-on, or domino, effect.

Another point of principle is whether there should be stigma. We Catholics know about stigma—or stigmata—as much as the Calvinists among us. At the end of the day, the lenders of last resort for many individuals and small business men are their family and friends. They are often the people who try to bail them out when matters become desperate and who end up out of pocket. Whatever the reason for bankruptcy, whatever the blameworthiness or otherwise and luck or bad luck of the bankrupts, there will always be people left to pick up the tab. Those people might be very close to the individual concerned.

If the Tory party is anything, it is the party of business, the free market and industry, and we recognise that people sometimes have to fail first. There are any number of highly successful business men around the world who did not succeed in their first, or even their second or third, venture. We understand that. Someone once said that failure is an orphan and success has many fathers. Everyone is happy and smiling, particularly the bank manager, when matters are going well, but successful businesses are often built up by men and women who have been honed by the problems of coming through a past failed business venture.

We want to develop three basic issues in some detail. One is the question of principle—whether there should be stigma and who the losers are in such situations. Secondly, what are the effects in the real world? Are we going to end up with a rogues charter, with limited examination of many bankruptcies? Thirdly, are the resources going to be available to deal with them?

I have had a submission from the Bankruptcy Association—I do not know whether other hon. Members have had it too. It seems to be one of the organisations that do not feel that their views have been sought or taken much account of. I am not sure what qualifies one to be a member of the Bankruptcy Association, but we shall glide over that issue. It makes a couple of points that, from the briefings that I have seen, I do not think anyone else has made. They are two issues that were previously mooted, but that did not appear in the legislation.

One of those issues is the idea of financial counselling for bankrupts. I should be interested to hear what the Under-Secretary has to say on that. I shall pick out one or two points from the National Association of Citizens Advice Bureaux briefing in a moment, although we all know of the massive burden that falls on local citizens advice bureaux and the enormous shift that they have had to make in their own arrangements and resources, certainly in my time as a Member of Parliament, to deal effectively with debt counselling. As I recall, there was a suggestion that such advice be provided on a more reliable and comprehensive basis, instead of simply from people such as those working for citizen advice bureaux.

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The other issue that has disappeared from the Bill—again I should be interested to know why—is the protection of a proportion of the equity in a family home.

12 noon

The citizens advice bureaux have produced some good briefings, which I shall not go into at enormous length. I have referred to the debt advice service that they provide. They welcome what they call the emphasis on ''rehabilitation of debtors''. They make the point about the affordability of bankruptcy, which I hope we shall debate under new clause 9 if we have time. For now, I simply flag up the fact that the citizens advice bureaux say that many of their clients for whom bankruptcy would be a practical option cannot afford to go bankrupt because they cannot afford to pay the deposit to the Insolvency Service. They helpfully set out in considerable detail the sorts of problems that they face week in, week out, in providing debt counselling to many thousands of people.

Like other organisations, particularly consumer organisations, the citizens advice bureaux broadly support what the Government are trying to do. However, there is another side to their views: despite all the consultation and everything else that is purported to have taken place, I was struck by the strong views about the effects of the proposals that were expressed in some of the briefings that I and other hon. Members have seen.

The Finance and Leasing Association, which represents 25-plus per cent. of all the fixed capital investment in the United Kingdom and 28 per cent. of all the consumer credit, tells me:

''We wholly support the Government's aim of encouraging enterprise in the UK.''

Fine so far, but the association has considerable reservations about the reduction in the period for automatic discharge as set out in the clause, saying that it

''will mean it is viewed as a soft option.''

That is worrying. The Under-Secretary of State has not said so in terms, but if one reads between the lines, it is clear that what is envisaged is bankruptcy more or less without stigma, except for the rogues and the wreckers.

There are some parts that the Government cannot reach, as it were, and I have a shrewd suspicion that whatever we pass in the Bill, in Orkney and Shetland there will still be stigma involved in personal insolvency. In other parts of the cappuccino economy, that stigma may have largely vanished—who knows? Attitudes are sometimes slow to change, but let us be clear that in this clause as in the rest of this part of the Bill, the aim is to change people's attitudes as much as anything else. We are attempting to change the perception of personal insolvency in this country. Before even considering the practical consequences of the Bill, we must consider whether that is what we want to achieve and whether it is worth achieving.

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Representations from the Finance and Leasing Association show that its members are not happy bunnies. On 31 January this year, the Association's director general, Mr. Martin Hall, met the Under-Secretary of State, which I am sure was a great pleasure for both of them,. The association says that

''despite receiving an undertaking that the Minister would try and encourage greater dialogue between the Bill Team and industry we were not even able to facilitate a meeting with the Team. I believe that the 'deluge' of briefing papers shows that we were not alone.''

That is worrying, given the association's massive responsibility for business and consumer lending in our economy.

A partner at PricewaterhouseCoopers, Mr. Patrick Boyden, made the obvious point that

''most bankruptcies are the result of consumer credit, not failed enterprises.''

Worried that reducing the stigma might encourage people to take on the wrong sort of financial risk, he said:

''Warning should be heeded from America, where a more friendly attitude towards consumer debt has led to a bankruptcy rate which is about 10 times the rate in the UK in relation to population.''

He went on to make a more chilling point that suggests what dangerous waters we might be entering. A survey in March revealed that almost half of first-time house buyers planned to borrow the cash needed for their mortgage deposits. I did not know that one could borrow a deposit, but presumably there are people out there are who are prepared to lend the money. If that figure is accurate, it is worrying, because it means that people are getting seriously over-extended in our very bullish property market.

I shall not delay the Committee, but I could cite statistics about people who do not simply borrow their deposits, but re-mortgage their properties, not to build a garage or something like that, but to improve their personal finances and pay off some of their consumer debts. That is a worrying trend. Against the background of sharply increasing consumer debt and much-increased borrowing of both mortgages and deposits to buy homes, the experience and advice of the consumer credit industry is important.

There seems to be clear blue water between the Opposition and the Government on that issue. The Under-Secretary of State would prefer us to focus on Scotland or Hong Kong, but I shall stick with America, where there is a political divide on bankruptcy. The Democrats are supportive of easier bankruptcy, while the Republicans regard it as a redistributive remedy that they oppose as anti-business and out of control. It is constructive to consider the American experience, although the Under-Secretary of State does not think so.